Not our fault: Casteen blames feds for UVA's losses

Explaining the university's 25 percent endowment loss, UVA president John Casteen blamed the federal government for "hiding" a recession.
PHOTO BY LINDSAY BARNES

Less than two months after unsuccessfully seeking a piece of the national stimulus package, University of Virginia president John Casteen announced Wednesday that the university endowment has lost $1.2 billion–- or 25 percent of its value–- and blamed the federal government for allegedly hiding an "undisclosed recession."

"We trusted the federal numbers," said Casteen in his annual State of the University address, "and believed during those four quarters of recession, that we were being told the truth. When it turned out that we were not, the basic assumptions of the model crashed."

In light of the economic downturn, Casteen announced in his afternoon remarks at Cabell Hall, UVA will be cutting $90 million from the current fiscal year's operating budget for an overall budget of $2.15 billion. Casteen credits UVA's in-house financial advisors as well as those at the embattled University of Virginia Investment Management Company (or UVIMCO), which is responsible for the endowment's investments, for keeping cuts to a minimum.

"We started trimming early," said Casteen. "We've done this before when we saw recessions coming. We did it simply because the economy didn't feel right during those four quarters when the government kept saying that we had no recession."

After the speech (which included an emotional remembrance of late admissions dean John A. "Jack" Blackburn, who died January 21), the Hook asked Casteen if he or anyone else at UVA could have done anything differently to lessen the endowment loss, Casteen replied, "There's really not much you can do if the information you have from the U.S. government is not accurate."

Casteen also announced a university-wide hiring freeze.

"We will not fill vacancies except in the most extreme situations," said Casteen. "Existing and future vacant positions will likely remain unfilled at least until we know the effects of the General Assembly budget and the federal stimulus package."

Despite this, Casteen emphasized that anyone who is presently working for the university has job security, and need not worry about recession-related unemployment.

"Laying off personnel in universities," Casteen said, "is a false economy. Places that have done it have inevitably hurt their programs. It's simply not a strategy that makes sense for a university that intends to be the very best of its kind."

In 2008, Casteen was the third-highest paid college president among public universities, with a compensation package of $797,048 according to the Chronicle of Higher Education. Asked if amid the nationwide belt-tightening he was willing to take a pay cut, Casteen said, "We'll have to see how this thing goes, but right now we're not asking anyone to take a pay cut."

One pay cut Casteen has already taken is that he lost the $220,000 he was adding annually for his side job, as a director of Wachovia Corporation, the banking company that dissolved, according to a Wachovia spokesperson, December 31 with its purchase by Wells Fargo.

Casteen emphasized his intent to continue donating portions of his salary back to the university. In 2008, Casteen made a $110,000 gift to the university capital campaign, roughly 13 percent of his university pay.

Despite the bad fiscal news, Casteen remained optimistic that UVA could continue to grow, mainly because UVA has yet to tap much of its potential market.

"Imagine what a sliver of the audience for executive education programs in Asia is worth," said Casteen. "Imagine what we can do in places where we have never been but where our name is known."

In Casteen's view, this sort of global-minded innovation will be what will ultimately see the university through the recession.

"We will meet these challenges, and we will succeed," said Casteen, "but we will be, once more, a new university when we're done."

–last updated 9:48am, February 4

29 comments

So this guy makes a million bucks a year and thinks that the federal government needs to tell him when to sell stock?

I guess those guys over at Darden blame Uncle Sam too.

His statements are an embarrassment to anyone whoever went to UVA.

I'll bet they start doing their own homework after this.

Maybe Obama can send FEMA down with water and trailers until they get back on their feet.

This is really bizarre. UVIMCO is well run, there is no shame in having lost a pile of money since June. Why not just say that instead of giving a rambling, incoherent answer?

I can assure you that UVIMCO does not use any sort of "model" that relies on the NBER's definition of recession, nor would (or could) it have acted much differently had the federal government more originally accurately estimated economic growth from the last 2 quarters of 2007. A lot of these losses stem from illiquid alternative investments that were made well before Q4 of 2007. Furthermore, it is ridiculous to suggest that the Endowment would have moved more of its assets into Cash in early 2008 had the Federal Government gotten the GDP numbers right at the end of 07.

Either Casteen has no idea what he's talking about, or (more likely) he's trying to create a fake bogeyman. Either way it is embarrassing for anyone whoever went to UVA. The guy was on the board of directors of Wachovia!

It seems the "brains" at UVA could have figured out long ago, it is mostly stupid to lay all your eggs in one basket. My guess, the donors are furious. My lord, UVA would have been better off stashing cash under a mattress. I never have trusted the stock market and I never will. I know many of the same mind, and they ain't hurtin financially either.

Casteen should take a pay cut. He's overpaid for being the UVA spokesman/media person.

The Darden children are fond of pointing fingers, too.

Nevermind that their unmitigated greed and arrogance spurred unwise and, often enough, unethical business decisions. The staff, faculty and so-called leadership of the school work in palacial surroundings and exploit the largesse of generous donors. And all in the name of what?

Those donors would shut their wallets and checkbooks double-quick if they had the slightest inkling of the shennanigans going on at that school.

The world needs more MBAs like the world needs a new strain of venereal disease.

Business students are not the answer. They are the problem.

And why are the Darden youngsters given so much "say so"? I know a family who took the advice of their young relative owning a MBA from UVA. The MBA directed the older folks to put their money in the market. Sadly, they have lost most of their hard earned $$$. Sometimes the kids have the degree, but lack common sense.

UVA should invest nearly the entire endowment in mortgates for alumni and live off of 5% perpetually, they can keep a years worth of cash in short term securities and always sell off the paper if a giant project comes along. They were geedy and DESERVED not only the loss but the humiliation.

All those geniuses and they couldn't see this train coming down the track?

I have looked closely at the UVa Endowment holdings and it appears that over half of the long-term funds are in highly risky difficult to value Hedge Funds and Private Equity. In many cases additional contributions must be added or the investor will lose some or all of the current investment. Saying the loss has been only 25% is a best case scenario. It could be far worse if the economy does not improve rapidly.

Looks like the Landmark Hotel wouldn't be the only unfinished building in town--South Lawn project and Ruffin Hall on hold pending state bond decisions

Bearish, the economy isn't "improving" until 2010 or later. Casteen sounds like an idiot, and I'm embarrassed that he's the president from the school at which I earned an advanced degree. There were plenty of voices in the blogosphere and in mainstream media that knew not only that the US was in a recession for the past year, but that the housing market was going to collapse and take down the global economy with it: Seeking Alpha, Nouriel Roubini,The Big Picture, Calculated Risk, Meredith Whitney of Oppenheimer. PLUS with the collapse of Bear Stearns LAST MARCH--guess what? And where is Dean Bruner in all this? The guy's an expert on panics. More losses coming..."hiring freeze" is just the beginning. Pathetic.

Dean Bruner pulls down half a million a year (public information; check it out) mainly to travel the world seducing would-be donors.

He's a not-bad academician forced by job title to masquerade as a politician.

Meanwhile, expect admissions numbers to suffer attrition -- to other, better schools.

Some days, I am ashamed to be a Wahoo.

Academics have taken a back seat for years to sports and entertainment. Maybe this will be a reality check and get the U back on track.

The students, faculty and alumni should demand for his resignation. Casteen is a complete idiot and an overpaid one at that. He blames the federal government for UVas losses, how about blame themselves for their greed and risky investments. Anyone can tell you investments are not guaranteed returns, they are risks. So they played the game and lost... Take responsibility for your greedy actions you bastard!!
And you completely contradict yourself... If you could tell the economy wasn't going well for four quarters why didn't you do anything about it??? Because you are greedy!!
The donors should be very upset and demand for accountability not passing the buck! CASTEEN must GO!

UVA has been in the business of building palaces instead of paying professors and keeping tuition costs affordable for the middle class--hopefully this recession will get their priorities in order

The cuts in government support has forced UVA (and most public institutions) to chase private funding. How do you get the big gifts? You put your wealthiest alumni on boards, get them personally involved in the success of the institution. Trouble is, once they have power they start to demand better performance from the endowments bc, "hey, my fund is getting 20%". UVA leadership was probably half seduced by the opportunity to get similar returns and half bullied into it.

Also, anyone who has been watching the news should know that many seemingly very low-risk investments were linked-up with the mortgage mess and got pulled down with it.

This is all Friday a.m. conjecture on my part. What we need is a report on what happened and why they didn't stop their losses sooner. Anyone hear if that is happening?

This is almost like a Monty Python bit. A President of a major, highly regarded college that also has a nationally-known business program, blaming what has always been an inept government for his ignorance. This ability to cast such blame publicly shows the huge arrogance. The poor financial decisions show that the university is not run by business geniuses, but rather an old boy network. (Flashback: "Brownie's doing a nice job, in't he? Good work, Brownie."

Maybe the question should be...To what end was UVa chasing private funding to make up for reduced government funding? Probably to build palaces versus improve learning.

And Casteen sat on the Board of Wachovia? $220 grand for a few days' work a year? Righteous bucks, dude. Glad you guys on the Board did such a good job there, as well.

Finally, Bearish, if you are correct in that distribution of investments, I ask...Why?

Oooh, this is precious. Bunch of geniuses at work at UVA.

Most of the Darden faculty are pulling down north of $175,000 each per annum. Most make more than that on the side, by consulting.

The dean is a millionaire (due in no small part to his UVA salary of $500K annually) who presents himself as a financial expert.

Many on the support staff are themselves Darden alumni. They walk around breathing deeply of their own fumes, sniffing with great enthusiasm, and declaring how grand they perceive themselves to be.

Not a one of them has a fu*cking clue.

Lord, what a joke.

An excellent previous article in "The Hook" covered the future commitments issues.

http://www.readthehook.com/stories/2008/11/20/COVER-uva-endowment-D.aspx

Cry me a river, you jackass! I know how UVa can save $797,048 right now...get rid of the bastard!!

Casteen connections help good ol' boys get jobs.

Darden's last chief of fundraising liked to drop Casteen's name and undoubtedly leveraged his connection with the UVA prez to score the job.

Word is, he couldn't raise a loaf of bread dough, much less money, so buh-bye.

Now the so-called leadership of Darden tries to raise money themselves...with equally dismal results.

It's not just the economy that affects giving to Darden and other parts of the university. Alumni are starting to realize that they are underrwriting rather extravagant lifestyles and lavish working conditions, when all along they thought they were donating to improve education.

If nothing else happens from this endowment fiasco, let it be a wake-up call to donors. Ask the tough questions. Demand to see the books. Find out where the money goes before you give.

Because God Only Knows the nimrods at the Darden School could really use another new car and a plump expense account to poot around the world...raising more money.

Casteen did his job well: keeping the righteous heirs of Mr. Jefferson off the scent of the treason which brought this collapse upon us - Bush's and Cheney's committing 9/11 for false war profiteering and indebtedness after having been unconstitutionally cheated into the White House by only the Roman Catholics' votes on the Supreme Court's 'Bush v. Gore,' to stop the Florida recount.

Did he think he wouldn't be found out?

It was refreshing the other day to see two of three "experts" on a CNBC interview show rightfully peg the creation of the Federal Reserve Bank as the further source of our "meltdown." Mr. Jefferson discussed the perils of the same issue in a letter to Pres. Washington concerning his impasse with the first Treasury Secretary. We now reap the evils of Hamiltonian subversion of Article 1, Section 8 Constitutional Money.

The University's Founder spelled it all out two centuries ago. Castini is a betrayer of The University, America, and The Creed.

Declare Jubilee. All start from scratch with no debt. Hang the traitors and expropriate the Fifth Column of the Roman Anti-Christ which backed the Rockefeller-front Bushes.

Wow, Will. I thought we were just plain po' folks taking out home loans when we didn't have enough money to make the payments! In any case, I am so glad to be taking everyone's money to bail me out of this crisis...I get to keep my house and screw the greedy banker who forcibly placed my hand on the pen to sign the mortgage papers as his Uzi was pointed at my basal skull.

Also, I can see you placed the blame on a Dem's shoulders with your reference to "Hamiltonian subversion." It was indeed Jimmy Carter's fault--with Hamilton Jordan as his architect--that brought about this crisis.

Monetized mortgage loans is no more constitutional money than Federal Reserve Notes...which John Kennedy's Executive Order 11,110 ended...until Rome's Fifth Column faction ended him to send us to die for their pope in Vietnam. The Roman Anti-Christ's pseudo-aristoi wishing to rule over us in Our Land, founded as a Whig Utopia, whose wealth and power is based on this fictive financial treason can gain small satisfaction from such witting, anonymous agents as "Never Been to a Game." Their walk to the nearest Tory Oak after Bush and Cheney are tried and fried, and they are fully expropriated, will likely not be quite so light-hearted.

This is not a $37 million dollar Reservoir expansion project as Mr. Frederick would have us believe. The 112 foot dam at Ragged Mountain obligates us in the near future to build a $60 million dollar pipeline from South Fork Rivanna Reservoir to Ragged Mt. Reservoir to fill it, with a pre-treatment facility and pump, to pump the water 9.5miles uphill. Don't be fooled before this is over the $100 million dollar dam and pipeline will cost far more, just ask a builder

We need an objective cost estimate from an experienced dredging company before we will know the real cost of dredging the South Fork Reservoir

If you would like to help bring this about go to:

cvillewater.info

and county folks the Board of Supervisors has never held a public hearing isn't it about time?

cvillewater.info

Obviously, there was something in it for the consultants because, mysteriously, they have become the contractors. "ast October, the firm won the $3.1 million contract for engineering the new Ragged Mountain dam"

“Moreover, the report suggests that 60-acre Chris Green Lake, like Lake Albemarle and Beaver Creek, could serve as a "last resort" by releasing water in times of extreme drought.”

The above is absolutely hysterical!

Chris Green Lake is not like Lake Albemarle and Beaver Creek at all! Lake Albemarle and Beaver Creek both flow into Meachums River. Meachums River and the Moormas River, at their confluence in Earlysville, form the South Fork Rivanna that flows into the Rivanna Reservoir.

LOL!!!

Chris Green Lake flows into the North Fork Rivanna! The confluence of the North Fork Rivanna and the South Fork Rivanna form the Rivanna River well below the Rivanna Reservoir. From there it flows though the breached Woolen Mills Dam and eventually into the James River at Columbia. The next impoundment down stream is Bosher’s Dam just above Richmond.

Releasing water from Chris Green Lake bypasses all of the local means to impound water. I would have to agree with “last resort” because it would do as much for Charlottesville as releasing water from Hoover Dam in Nevada! Now you could possibly truck the water from Chris Green Lake to a water treatment plant, but “releasing water” is laughable.

Such a blatant oversight on the part of the consultants leads me to question their abilities to consult. And money was paid to be told by consultants that Chris Green Lake could serve as a "last resort" by releasing water in times of extreme drought.

LOL!!!

Researching where streams and rivers flow takes no more knowledge than the simple ability to read a map. And I look forward to seeing the release of water from Chris Green Lake during the next drought. I’ll be the first to call a thirsty Richmond and tell them Chris Green is on its way!

$205 an hour and the consultants work is an absolute joke!

LOL!!!

With all due respect freespeechtoday, (and not to be misconstrued as support of the consultants work) but do you know of the North Fork Water Treatment Plant?
It's small with a maximum capacity of 2 MGD and an actual use of much less. But it is downstream from Chris Greene Lake.
Cvillewater has done a nice job of outlining the existing system. Check it out.
http://www.cvillewater.info/currentwatersupply.html

The Lorax wrote: “With all due respect freespeechtoday, (and not to be misconstrued as support of the consultants work) but do you know of the North Fork Water Treatment Plant?”

I am indeed honored to learn of this, feel that the sediment has been cleared and crystal clarity can be brought to out next glass of chlorine-laced sparkling drinking water.

I am still glad I own a well, but greatful Richmond is not the single recipient of Chris Green. I learned to swim there as a kid and I know drinking water is not the only liquid that flows freely. Drink up! :)

Here's my latest contribution to this debate.

http://super-blair.blogspot.com/2008/03/emperor-has-no-water-hoax.html